Boeing losses could become “major event” for re/insurers: Deutsche Bank

Losses resulting from the recent Ethiopian Airlines crash and subsequent grounding of Boeing’s 737 Max 8 aircraft have the potential to spread throughout the industry and become a “major event” for re/insurers, according to analysts at Deutsche Bank.

The firm stated that the complexity of the case means claims could come from many different angles and affect various policies.

Based on historical events, Deutsche Bank estimates that the pure property claim for the plane and indemnity payments for the crash victims will total between $50-100 million.

Deutsche Bank noted that another large source of potential claims could come from Boeing’s liability coverage if the security system/software on the plane turns out to be a source of malfunction.

Further losses could also result from business interruption, with air carriers forced to cancel flights or shift capacity to other flights following the suspension of the entire Boeing 737 fleet in the days after the crash.

On the other hand, it could also affect broken value chains for businesses, analysts said, although Deutsche Bank believes the aircraft is less used as a cargo carrier.

Finally, it added that there is also a risk from potential law suits and with it from D&O policies.

Given the size of Munich Re’s loss estimation, Deutsche Bank expects the firm to incur substantial liability claims, although the absence of other major catastrophe events so far in Q1 2019 should leave the reinsurer well within its quarterly budget.

Munich Re owns 51% of Global Aerospace, which is the lead insurer for Boeing alongside broker Marsh. Berkshire Hathaway owns the remaining 49%.